Question

how to calculate beta of a portfolio??

Answer 1

use the equation of WACC, if the growth not provided or qualitative forcasting hard count use the nearest assumtion.

Answer 2

if u know the beta and theproportion of investment of the individual stocks of the portfolio then u can calculate the beta of the portfolio by multiplying the beta of stock with its proportion then adding all.

Answer 3

OK... BUT HOW TO CALCULATE BETA OF INDIVIDUAL ASSETS??

Answer 4

the beta of the individual asset can be calculated by this formula
Beta of Security = Covariance(Security, Market)/Variance of Market
i.e., \[\beta =\sum(R_{i}-R_{i}^{'})*(R_{m}-R_{m}^{'})/\sum(R_{m}-R_{m}^{'})^2\]
where, R(i) return on security i
R(i)' expected return on security i
R(m) return on market
R(m)' expected return on market

Answer 5

Beta comes from a regression between the returns on a stock and the returns of the market (people uses indexes, normally S&P 500). To choose your index, try to select one that replicates most of the market, for example try to select one that includes a mix of industries, also use a value weighted index NOT a price weighted index.

Answer 6

\[\beta=(R-Rf)/(Rm-Rf)\]

Expected Rate of Return (R)
Risk Free Interest Rate (Rf)
Expected Market Return (Rm)